Out with the old, in with the new – all change for Construction

There has been quite a lot going on this last year in the construction sector, with small but real indications that activity levels are slowly beginning to pick up. This has been coupled with some developments in the legal landscape within which construction operations are undertaken, which promise to bring about changes for all those involved in construction. Some of these developments are summarised below.

Better cash flow in the industry and faster dispute resolution.

The Construction Contracts Act (the “CCA”) was enacted on 29 July 2013, more than three years after it was first proposed by Senator Feargal Quinn. The CCA will bring changes to those working in construction in a number of ways. Firstly, the CCA seeks to being about improvements to payment practices in construction, by requiring that all ‘construction contracts’ include adequate mechanisms for determining the amount and the periods for interim payments. Many main contracts and sub-contracts already contain such provisions, but the CCA will essentially provide a safety net for those operating under contracts which do not contain such provisions, or, in the case of sub-contracts, where the periods for interim payments exceed 30 days.

The CCA also introduces mandatory requirements and timelines for the issue of written payment claim notices and responses (where the paying party does not consider that all monies claimed are due). Some commentators, and indeed, the draft Code of Practice (which will accompany the CCA) suggests that it is the payment claim notice and response which will circumscribe any ‘dispute relating to payment’ which is referable to adjudication.

The CCA also outlaws pay when paid provisions, which can still be found in some standard and bespoke forms of contract, save in limited circumstances where the paying party further up the contractual chain has become insolvent.

Importantly, the CCA places the right to suspend for non-payment onto a statutory footing and whilst such an entitlement already exists in many standard forms (including the public works contracts, albeit subject to a requirement to give 3 weeks’ notice), having this on statutory footing may encourage more parties to avail of this important protection. The entitlement extends to where a party has failed to make payment required pursuant to an adjudicator’s s decision. There are, however, some limits to this entitlement (for example, where a payment dispute is referred to adjudication, or where a decision is challenged, and whether these will operate to remove the full protection intended by the CCA by introducing a right of suspension will need to be tested in the courts

Despite the publicity around the enactment of the CCA, there has been less focus on the broad application that the Act will have, not only in terms of the ‘activities; which fall within the definition of ‘construction operations’, but also the fact that the provisions relating to payment (as well as rights of supension and adjudication) will apply equally to professional appointments for those providing design and other services in relation to construction.It is perhaps in this arena where the introduction of the CCA will make the greatest changes to current payment practices.

Finally, the CCA creates a statutory entitlement for parties to refer ‘disputes relating to payment’ to adjudication at any time, with the prospect of a decision as early as 28 days after the referral of the dispute. This will, inevitably, give rise to charges of ‘rough justice’ as in the UK, although many hold the view, including the courts, that the benefit of a quick answer can outweigh the luxuy of necessarily getting the ‘right answer’. Quite how adjudication will operate along side existing dispute resolution procedures generally found in construction contracts remains unclear, or indeed, what approach the courts will take to upholding the temporarily binding nature of an adjudicator’s decision

The CCA requires a ministerial order to be brought into operation, as well as the establishment of a national panel of adjudicators and a code of practice to govern the conduct of adjudication, but we can expect it to ‘go live’ sometime in 2014.

Signing your life away?

Another development which has not perhaps been received so warmly came with the Building Control (Amendment) Regulations 2013. These Regulations seeks to amend and significantly overhaul the system of self certification, by which parties involved in building projects are required to certify key elements of the design and construction. The Regulations will impact both builders and designers (and their insurers!), who will be required to issue certificates containing broad assurances as to the design and construction of building works, both in relatin to compliance with applicable standards and regulations, and in relation to meeting the drawings and specifications lodged with the local authority. The Regulations have caused much controversy, particularly in relation to the form of certificates proposed, and it is clear that a more measured approach is require. Where this will finally arrive remains uncertain, but again, the changes will felt across the industry.

Bringing it Home!

The Safety, Health and Welfare at Work (Construction) Regulations 2013 were also enacted this year, and came into effect from 1 August 2013. The key impetus behind the revised Construction Regulations 2013 was to bring Ireland into line with the underlying European Directive concerned with safety on construction sites, and to ensure that residential home-owners undertaking works to their own homes were brought within the definition of ‘client’ and therefore subject to statutory duties with regard to health and safety. Some concerns have been expressed that this will add administrative burden to those undertaking small scale constrcution work, but it is hard to argue with measures designed to ensure safety on site is given proper consideration.

The other main change was to extend the exempting clients from the requirement to appoint project supervisors (for both the design process and construction stage) where routine works of a short duration are being undertaken by a single contractor. Previously, this exemption only applied to routine maintenance and repair works. However, whenever there is more than one contractor involved in the works, or there is a particular risk (such as working at height) or the works are scheduled to last more than 30 days, the statutory appointments are required to be made.

Other than the foregoing, the Construction Regulations 2013 essentially consolidate the 2006 Regualtions and the various amendments made between then and the enactment of the new regulations into a single statutory instrument, whilst retaining the structure and order of the earlier regulations.

Looking forward

This has been a busy year for regulatory developments in the sector, and certainly an unusual year in that regard. This will create new challenges for those working in the sector during the year ahead, but will also, hopefully, bring about some improvements, particularly in relation to payment practices and, hopefully, more efficient dispute resolution. Overall, things are looking more positive for those working in construction, notwithstanding the significant challenges that remain.